8. Project Auditing and Termination

Econ106 Lecture-Discussion No. 8

Project Audit/Evaluation/Review• A more or less formal inquiry into any aspect

of the project• A major vehicle for evaluation• “Evaluation” – to set the value of; to appraise• “Project evaluation” – appraises the progress

and performance of a project compared to that project’s planned progress and performance, or compared to the progress and performance of other similar projects

Purposes of Evaluation • Four dimensions of project success

– Efficiency in meeting both the budget and schedule (meeting cost, time and scope objectives)

– Customer impact/satisfaction (loyalty, repurchase, fulfilling customer’s needs, actual use by the customer)

– Business/direct success (level of commercial success, market share; yields, cycle times, quality, processing steps)

– Future potential (factors relating to opening a new market, developing a new line of products and services, developing a new technology, skills, competencies)

Purposes of Evaluation, 2To help translate the achievements of the

project’s goals into a contribution to the parent organization’s goals.To do this, all facets of the project are studied

in order to identify and understand the project’s strengths and weaknesses.

It is the equivalent of an application of Six-Sigma or TQM to project management.

Result in a set of recommendations for the project’s direct goals

Purposes of Evaluation, 3To review contributions of ancillary/ unplanned goals:

Improve understanding of the ways in which projects may be of value to the organization

Improve the process for organizing and managing projects (project management maturity)

Provide information and experience for entering new markets Provide a congenial environment in which project team members can work

creatively together Identify organizational strengths and weaknesses in project-related personnel,

general management and decision-making techniques and systems Identify and improve the response to risk factors in the firm’s use of projects Allow access to project policy decision-making by external stakeholders Improve the way projects contribute to the professional growth of project team

members Identify project personnel who have high potential for managerial leadership

The Project AuditA thorough examination of the management

of a project, its methodology and procedures, its records, its properties, its budgets and expenditures and its degree of completion.

Different from and broader than a financial audit (use and conservation of resources) and technical audit

It may deal with the project as a whole, or only with a part of the project

The Formal Audit ReportCurrent status of the project

Does the work actually completed match the planned level of completion?

Future statusAre significant schedule/scope changes likely?

If so, indicate the nature of the changesStatus of crucial tasks

What progress has been made on tasks that could decide the success or failure of the project?

The Formal Audit Report, 2Risk assessment

What is the potential for project failure or monetary loss?

Information pertinent to other projectsWhat lessons learned from the project being

audited can be applied to other projects being undertaken by the organization?

Limitations of the auditWhat assumptions or limitations affect the data

in the audit?

The Project Audit Life CycleProject Audit InitiationProject Baseline DefinitionEstablishing an Audit DatabasePreliminary Analysis of the ProjectAudit Report PreparationProject Audit Termination

Responsibilities of the Project Auditor/Examiner“Tell the truth”: objective, ethical manner Walker et al (1980): independence:

Assemble a small team of experienced expertsFamiliarize the team with the requirements of

the projectAudit the project on-siteAfter completion, debrief the project’s

managementProduce a written report to the PM and project

team for their responseFollow up to see if the recommendations have

been implemented

The Varieties of Project TerminationBy extinction

stopped due to success or failure/overrun by the external environment, also “project murder”

By addition institutionalization (transfer of project assets and

functions)

By integrationproject assets and functions are distributed among

existing elements of the parent organization

By starvation“slow starvation by budget decrement”; phase out

When to Terminate a Project: Fundamental Causes of Project FailureProject organization not requiredInsufficient support from senior managementNaming the wrong person as project

managerPoor planning; crisis management becomes a

way of life

The Termination ProcessDecision

The primary argument for project continuance or termination is whether or not the organization is willing to invest the estimated time and cost required to complete the project, given the project’s current status and current expected outcome.

Implementation: project closeout process

Duties of Termination ManagerEnsure completion of the work, including tasks

performed by subcontractors.Notify the client off project completion and ensure

that delivery (and installation) is accomplished. Acceptance of the project must be acknowledged by the client.

Ensure that documentation is complete, including a terminal evaluation of the project deliverables and preparation of the project’s Final Report.

Clear for final billings and oversee preparation of the final invoices sent to the client.

Redistribute personnel, materials, equipment, and any other resources to the appropriate places.

Duties of Termination Manager, 2Clear project with legal counsel or consultant.

File for patents if appropriate. Record and archive all “nondisclosure” documents.

Determine what records (manuals, reports, and other paperwork) to keep. Ensure that such documents are stored in the proper places and that responsibility for document retention is turned over to the parent organization’s archivist.

Ascertain any product support requirements (e.g. spares, service), decide how such support will be delivered, and assign responsibility.

Oversee the closing of the project’s books.

The Final Report: A Project HistoryProject Performance

A comparison of what the project achieved (termination evaluation) with what the project tried to achieve (project proposal)

Administrative PerformanceReview of administrative practices and

highlight those that worked particularly well or poorly; report the reasons why some specific practice was effective or ineffective; recommendations for future use

The Final Report: A Project History, 2Organizational Structure

How project team was organized and a discussion on how the structure aided or impeded the progress of the project; also report modifications that were helpful to project management

Project and Administrative TeamsAssessment of each member of the project team’s

duties and performance (strengths and weaknesses); discussion of reasons for good and poor performance; recommendations (usually confidential)

The Final Report: A Project History, 3Techniques of Project Management

How the key tasks (forecasting, planning, budgeting, scheduling, resource allocation, risk management and control) were handled

ADDITIONAL For Econ106 requirement: cover page must be individually signed by members to

indicate that you have read and agree to the full report TOC (Table of Contents) Appendices (letters—including copy of thank you letter

and list of addressees thanked, certificates, photos, video in cd with envelope attached to inside back cover)

Feedback evidence (evaluation survey summary ratings, evaluation survey questionnaires, confidential letter of assessment from partners in a sealed envelope)

Econ106 Project PortfolioPortfolio Envelope Contents

Final ReportProject RegisterIndividual essaysTEAM NAME

Members

PROJECT NAME